Thursday, November 24, 2011

My first "proper" job (not counting the year I spent waiting to do what I wanted to do) had a final salary pension scheme. The retirement date when I joined was 60 - it had relatively recently been increased from 55. This is in a career in which a fair number of people end up having to stop on medical grounds before retirement date.

Around 10 years into this job, the final salary pension scheme was closed for new joiners. It was in a state of substantial actuarial deficit - meaning that the total amount of money that was held by the scheme, coupled with slow growth anticipated, could not meet the financial demands anticipated. The company put more money into it, but they also said that employees had to either increase their contribution to obtain the benefit to which they had previously entitled to, or accept a reduced benefit. It goes without saying that there was no "state" or "taxpayer" to cover any deficit, despite the fact that part of the reason for the deficit was because of a certain chancellor changing the rules to take money out of pension schemes.

Five years ago, I changed to a job in the same sector, but with a different employer. I was able to freeze my final salary pension with the first employer. The new one had a money-purchase scheme, but the retirement date was now 65.

So, over the course of just over 20 years, remaining in the same sector, I have gone from a final salary pension to a money-purchase pension, and my retirement date has got 10 years later.

No-one wants to see other people having to work longer or getting smaller benefits. But neither is it reasonable to assume that because you are a public sector employee, you should be entitled to have a pension that is subsidised with taxpayer's (my) money that is better than any I can hope to have. It used to be the case that such perks could be justified because the terms and conditions of public sector employees were generally worse than those in the private sector - but that's not the case any more. (Here's a report about the relationship between public and private sector pay.)

The public sector strikes aren't to do with economic reality: they are politically opportunistic attempts to chuck stones at the coalition government. There is no political party that would be prepared to back away from reform, and I suspect that the Labour party are secretly relieved that they aren't the party that has had to take the bull by the horns and risk alienating their union supporters. Whilst of course nobody would disagree with the idea of nurses and teachers being able to stop work before they are too old to do their jobs effectively, I suspect it's also the case that few people employed by the private sector are prepared to accept tax rises to allow the public sector privileges that are long gone from the private sector.